Pearl states case for Resolution

Pearl Assurance repeated its stance that the proposed Friends Provident/Resolution merger is poor value for Resolution shareholders although Pearl stopped short of declaring a bid, but it noted some figures behind its current thinking.

‘The proposed merger between Resolution and Friends Provident will not create more value for Resolution shareholders than other options, and will expose them to the significant risks of integration and of the synergies promised not being realised,’ Pearl said in a statement to the stock market.

Pearl said Resolution (RSL) shareholders should consider several factors that it will include in documents to boost its case in early October. These include:

– the closing Resolution share price of 616p on 25 July following the announcement of the merger with Friends but prior to Pearl’s announcement relating to the disclosure of its shareholding;

– the ‘see through’ price of approximately 575p implied by the original Resolution/Friends merger terms based on the Friends closing share price on 27 September;

– the price of recent comparable transactions for primarily closed life
fund businesses in the UK;

– Resolution's tangible embedded value per share of approximately 611p as at 30 June;

– the highest price that Pearl has paid for Resolution shares within the last 6 months, 660p;

– the announced interim dividend of 9.17p per share to Resolution shareholders on 26 October;

Yesterday analysts rejected the chances of Pearl Assurance making a successful all-cash bid for Resolution next week. Analyst Peter Elliot at MF Global Securities called a potential Pearl offer next week at around 660p per Resolution share or £4.5 billion ‘totally unrealistic’. The analyst also discounted that Resolution or its shareholders would consider an offer around 660p.